Michigan Gov. Rick Snyder said today in his annual energy speech that he wants to work with the state Legislature over the next two years to continue to improve energy efficiency, increase renewable energy production and lower residential and industrial energy bills.

But he stopped short of making concrete energy policy proposals. He also appeared reluctant to support increasing the existing 10 percent cap on customer choice of energy providers.

“I have talked with legislative leaders” about energy policy changes, said Snyder, who spoke for 30 minutes at Cadillac Place in Detroit. “This is something that is a rolling thing. We can do some easy things in 2014, like reliability and affordability.”

The governor said he is cognizant 2014 is also an election year.

“It will be difficult to get something done,” said Snyder, adding: “The Legislature has not come out with priorities for next year.”

Increase renewable energy portfolio?

By 2015, however, Snyder said he wants to support legislation that continues to increase the renewable energy portfolio standards beyond the 10 percent production requirement already enshrined in 2008’s energy legislative package.

“We have increased renewables” over the past four years, Snyder said. “Let’s set a range that is a function of what is cost-efficient, reliable and has a good cost benefit.”

Snyder declined to state a specific percentage target as a goal. However, he said the energy policy should cover 10 years from 2015 to 2025.

“We need to transition from coal to natural gas and renewables,” he said. “We need to move that way to help residential and industrial users and protect the environment.”

Snyder acknowledged there will be a significant reduction in coal plants in Michigan over the next 10 years.

“This gives us an opportunity to say, What do we replace that with? Natural gas or renewables?” said Snyder, noting that he wants a flexible policy that takes into consideration prices for gas and renewable energy production.

Snyder hesitated from endorsing a 90-page Michigan Public Service Commission report released in November that concluded there are no technical problems to increasing the standard to as much as 30 percent of electricity production in the state by 2035.

“We can’t get up to 30 percent because that goal was for 2035 and we need a 10-year policy to 2025,” said Snyder, adding that “people can make a reasonable assumption based on the 2025 range.”

Based on Snyder’s statement, Michigan could safely add 1 percent of renewable energy per year from 2015 to 2025 to generate 20 percent of renewable energy by 2025.

Last fall, voters rejected a ballot proposal that would have required 25 percent renewable energy by 2025. At the time, Snyder promised he would come up with a comprehensive energy policy.

Over the past year, the PSC and the Michigan Energy Office have conducted seven statewide hearings, collected comments and issued four reports.

The four reports covered customer choice, renewable energy, efficiency and other areas, including the reasons why Michigan has higher rates than other states.

Cloudy future for customer choice

Going forward, perhaps the most controversial issue Snyder and legislators will face has to do with the controversial 2008 law that placed a 10 percent cap on customers who want to switch from utility companies, including DTE Energy Co. and Consumers Energy Co.

A PSC report said if the 10 percent cap did not exist, “choice participation would be approximately 25 percent for Consumers and 21 percent for DTE.”

DTE and Consumers oppose increasing the cap.

Snyder suggested he is not in favor of increasing the 10 percent cap. He said he does not think it is fair that some companies “bounce back and forth” between utility companies to get the best prices “like arbitrage” markets.

“We are asking the wrong question (about choice),” he said. “We need to step back and look at competitiveness. How can we make sure we have appropriate rate structures that are not costs to other users in the state?”

In a statement, Wayne Kuipers, executive director of Energy Choice Now, said high electricity rates for homeowners that also hinder job growth can be addressed by House Bill 5184, introduced earlier this month by Rep. Mike Shirkey, R-Clarklake.

“On behalf of job providers and residents, we look forward to addressing the governor's concern in the coming year by working with him and lawmakers to increase electric competition and decrease electric rates in Michigan,” Kuipers said.

HB 5184 would remove the 10 percent cap on electric choice and open Michigan’s electricity market to full competition. The bill also provides some protection for utility companies during the transition from a hybrid regulatory model to full competition.

Shirkey said he was disappointed Snyder was noncommittal in taking a position on the electric choice issue.

“I like to frame it as electric competition (rather than) electric choice,” Shirkey said. “I am disappointed it seems we are pushing (electric choice issues) off into the future. Ratepayers are enjoying the worst of both systems and putting this off makes it worse.”

Shirkey said the governor seemed to suggest that there would be special rate cases for different customers – residential, business and industrial.

“This is not consistent with our Republican ideals,” he said. “Nobody can defend the status quo. You can’t put a logical argument in favor of the status quo.”

Shirkey said he has very high expectations that the House will hold “robust debate” on his bill to eliminate the 10 percent cap.

Energy efficiency

Snyder also said he wants to continue to improve energy efficiency. A PSC report in November concluded utility companies have exceeded their targeted goals for energy efficiency.

The report said customers have saved $3.55 in electricity costs for every $1 invested in energy efficiency. A total of $1.2 billion has been saved in lower electricity costs since the program began under Public Act 295 in 2008.

Ratepayers have the ability to reduce energy consumption up to 35 percent by adopting measures such as efficient equipment, insulation and automated controls, said the report.

“Let’s avoid energy waste and be more thoughtful about this,” Snyder said. “Because of a variety of circumstances, we have reduced the coal used. I am happy that percentage is going down over next 10 years because coal is not preferred from an environmental standpoint.”

Snyder also said reducing energy waste also reduces bills for residential and industrial customers.

“We need to do a better job at bringing down costs,” he said. “Right now we are above (national) averages. We have higher rates, but we use more energy. We waste more energy, to be blunt.”

Reducing energy costs for industrial is a jobs issue that could make Michigan more competitive with the rest of the country, Snyder said.

Overarching all else, Snyder said, is that he wants the state’s energy policy to protect the environment.

“It is critical, very important,” Snyder said. “We have an opportunity to say we need to deal with mercury, acid rain and particulates. Are there sub-goals that are better for all Michiganders?”

Snyder said he loves to fish and doesn’t want mercury in his meal. “When I catch that fish, I (want to) eat it,” he said.

Interest groups respond

In statements, several groups said Snyder’s energy announcement was a step in the right direction. They called for quick action by the Legislature to move Michigan from coal to clean energy and increase efficiency programs:

Jim Byrum, president of the Michigan Agri-Business Association: “We applaud Gov. Snyder for his leadership on this issue. Michigan’s agribusinesses are already taking advantage of energy efficiency technology, which helps them reduce energy waste and save money. We look forward to working with policymakers to expand Michigan’s successful energy efficiency programs in 2014.”

Rory Neuner of MI Air MI Health: “Michigan currently gets more than half its electricity from coal and that needs to change. Dangerous pollution from coal-burning power plants impacts the health of Michiganders around the state. I commend Gov. Snyder for making the transition from coal to clean one of his priorities. It will reduce illness, help rein in health care costs and ultimately save lives.”

Samantha Hawkins, Michigan Municipal League: “We praise Gov. Snyder for paving the way for legislative action on increasing our use of clean, renewable energy and energy efficiency. As we shift to greater use of clean energy, the cost of producing and using energy efficient and clean energy products continues to decline – much like flat-screen TVs and computers now cost a fraction of what they once did. By taking advantage of these advances in technology and cost-saving measures, we can relieve pressure on municipal budgets so our communities can provide better basic services and create vibrant places to live.”

Patty Birkholz, west Michigan director for Michigan League of Conservation Voters: “Michigan’s current clean energy standards are driving down the cost of business in Michigan and saving people money on their energy bills. If state legislators stall on strong energy policies, we stand to lose the jobs and savings generated to date,” said Birkholz, who authored the current standards. “Today’s announcement creates the traction needed for progress straight out of the gate next year.”